The study of how scarce resources are allocated to fulfill the infinite wants of consumers.
Scarcity
All goods and services with a price are relatively scarce to people's demand for them.
Any good or service that has a price, and is thus being rationed, is known as an economic good.
Choice
The infinite resources force people to make choices.
How people allocate their limited financial resources and choosing between alternatives.
Opportunity cost
The next best alternative foregone when an economic decision is made
If a good or service has an opportunity cost then it must be relatively scarce, so it will have a price and be classified as an "economic good"
"free goods (unlimited resources) do not have an opportunity cost
The basic economic problem
What should be produced and in what quantities?
How should things be produced?
Who should things be produced for?
There are two theoretical allocation (rationing) systems used to settle the problem
The free market system and the planned economy.
Factors of production
The four resources that allow an economy to produce its output
Land
All natural resources including non-renewable raw materials, and renewable resources such as cultivated products
Labour
Human factor
Physical and mental contribution of the existing workforce to production
Capital
The factor of production that comes from investment in physical capital and human capital
Physical capital is the stock os manufactured resources
Human capital is the value of the workforce
Management (entrepreneurship)
Entrepreneurs organizing and risk-taking factor of production
Production possibilities curves
Used to show the concepts of scarcity, choice, and opportunity cost, among other things.
PPC shows the maximum combinations of goods and services that can be produced by an economy in a given time period.
It is possible to produce at any point within the PPC, but in reality not all the factors of production in economy are being used efficiently.
Utility
Total utility: the total satisfaction gained from consuming a certain quantity of a product
Marginal utility is the extra utility gained from consuming one more unit of a product.
Microeconomics and macroeconomics
Microeconomics deals with smaller, discrete economic agents nd their reactions to changing events
Macroeconomics takes a wider view and consider such things as measuring all the economic activity in the economy, inflation, unemployment, and the distribution of income in the whole economy.
Positive economics and normative economics
Positive economy deals with areas of the subject that are capable of being proven to be correct or not
Normative economics deals with areas of the subject that are open to personal opinion.
Economists and model building
Rationing System: planned economies vs. free market economies
Planned economies: The government makes the decision for the three basic economics problem (How, who, what?)
All resources are collectively owned (USSR, China)
Decision are made by the government on behalf of the people and, in theory in their best interests.
The immense quantity of decision to be made among all the data to be analyzed, factors to be allocated makes central planning almost impossible to achieve with any decent level of efficiency.
Free marketing economies: Private enterprise economy or capitalism, prices are used to ration goods and services.
The economy should work relatively efficiently and there should be few cases of surpluses and shortage.
Economic growth
National income is the value of all the goods and service produced in an economy in a given tie period, normally annual.
In order not to overstate the value, any increase caused by inflation is ignored and the national income after this has been done is known as the "real" national income.
The economy is increased in real national income per capita (per head)
Economic growth doesn't tell us very much about the actual welfare of the people in a country, since its purely a money measurement and an average
Economic development
Unlike economic growth, this is a measure of welfare, a measure of well-being.
It is usual to measure the economic development not just in monetary terms such as GDP, but also in terms of other indicators (education, health and social)
Sustainable development
Economic growth cannot be sustained into the future in environmental degradation is taking place and non-renewable resources are being used up at too fast a rate.
"Development that meets the needs of the present without compromising the ability of future generations to meet their own needs"
Summary
This chapter explains the fundamental informational of economics. It gives a brief but general explanation of the most crucial terms such as scarcity, choice and opportunity cost. Building on to the basic terminologies, the book established the concepts of how economics is implied in daily life. The information stated in the first chapter is brief, but gives student the overall idea of what economic is. Questions
Is planned economics the same idea with communism? Where the government decides the distribution of all the unpriced goods?
How would the concept of sustainable development be supported when we have only got limited non-renewable resources for our future generation? Do we look at the microeconomic or the macroeconomic?
By looking at opportunity cost, do economist aim for the short term advantage or long term advantage?
How would Japan's macroeconomics be affected by Abe's new policy?
Is inflation the only cause of the rising of price?
Found Awesomeness
China's one child policy http://economy.money.cnn.com/2013/08/14/china-one-child/
This article published on CNN website takes on a broader view of China's one-child policy. It used the concept of macroeconomics and talks about the possible reduction in labour force and therefore the economic growth would decrease.
Riley, Charles. "The Economics of China's One-child Policy - Economy." Economy RSS. CNN, 14 Aug. 2013. Web. 24 Aug. 2014.
Economy Growth of China
This image includes all the general data and statistics of China's economy. It provides information of China's economy position around the globe and its GDP.
"Economic Growth of China (Infographic)." Prafullanet. N.p., n.d. Web. 24 Aug. 2014. Original Awesomeness
This comic explains the basic concepts of inflation is the simplest way. Inflation plays a huge role in the economics world
The Foundations of economics
- Economics is the study of rationing system
- The study of how scarce resources are allocated to fulfill the infinite wants of consumers.
Scarcity- All goods and services with a price are relatively scarce to people's demand for them.
- Any good or service that has a price, and is thus being rationed, is known as an economic good.
Choice- The infinite resources force people to make choices.
- How people allocate their limited financial resources and choosing between alternatives.
Opportunity cost- The next best alternative foregone when an economic decision is made
- If a good or service has an opportunity cost then it must be relatively scarce, so it will have a price and be classified as an "economic good"
- "free goods (unlimited resources) do not have an opportunity cost
The basic economic problem- What should be produced and in what quantities?
- How should things be produced?
- Who should things be produced for?
- There are two theoretical allocation (rationing) systems used to settle the problem
- The free market system and the planned economy.
Factors of production- The four resources that allow an economy to produce its output
Land- All natural resources including non-renewable raw materials, and renewable resources such as cultivated products
Labour- Human factor
- Physical and mental contribution of the existing workforce to production
Capital- The factor of production that comes from investment in physical capital and human capital
- Physical capital is the stock os manufactured resources
- Human capital is the value of the workforce
Management (entrepreneurship)- Entrepreneurs organizing and risk-taking factor of production
Production possibilities curves- Used to show the concepts of scarcity, choice, and opportunity cost, among other things.
- PPC shows the maximum combinations of goods and services that can be produced by an economy in a given time period.
- It is possible to produce at any point within the PPC, but in reality not all the factors of production in economy are being used efficiently.
Utility- Total utility: the total satisfaction gained from consuming a certain quantity of a product
- Marginal utility is the extra utility gained from consuming one more unit of a product.
Microeconomics and macroeconomics- Microeconomics deals with smaller, discrete economic agents nd their reactions to changing events
- Macroeconomics takes a wider view and consider such things as measuring all the economic activity in the economy, inflation, unemployment, and the distribution of income in the whole economy.
Positive economics and normative economics- Positive economy deals with areas of the subject that are capable of being proven to be correct or not
- Normative economics deals with areas of the subject that are open to personal opinion.
Economists and model building![image[1].jpeg](https://choosing-is-refusing.wikispaces.com/file/view/image%5B1%5D.jpeg/519423062/427x199/image%5B1%5D.jpeg "image[1].jpeg")
Rationing System: planned economies vs. free market economiesEconomic growth
- National income is the value of all the goods and service produced in an economy in a given tie period, normally annual.
- In order not to overstate the value, any increase caused by inflation is ignored and the national income after this has been done is known as the "real" national income.
- The economy is increased in real national income per capita (per head)
- Economic growth doesn't tell us very much about the actual welfare of the people in a country, since its purely a money measurement and an average
Economic development- Unlike economic growth, this is a measure of welfare, a measure of well-being.
- It is usual to measure the economic development not just in monetary terms such as GDP, but also in terms of other indicators (education, health and social)
Sustainable developmentSummary
This chapter explains the fundamental informational of economics. It gives a brief but general explanation of the most crucial terms such as scarcity, choice and opportunity cost. Building on to the basic terminologies, the book established the concepts of how economics is implied in daily life. The information stated in the first chapter is brief, but gives student the overall idea of what economic is.
Questions
Found Awesomeness
China's one child policy
http://economy.money.cnn.com/2013/08/14/china-one-child/
This article published on CNN website takes on a broader view of China's one-child policy. It used the concept of macroeconomics and talks about the possible reduction in labour force and therefore the economic growth would decrease.
Riley, Charles. "The Economics of China's One-child Policy - Economy." Economy RSS. CNN, 14 Aug. 2013. Web. 24 Aug. 2014.
Economy Growth of China
This image includes all the general data and statistics of China's economy. It provides information of China's economy position around the globe and its GDP.
"Economic Growth of China (Infographic)." Prafullanet. N.p., n.d. Web. 24 Aug. 2014.
Original Awesomeness
This comic explains the basic concepts of inflation is the simplest way. Inflation plays a huge role in the economics world